We all want a great deal on our real estate purchases.
For some, this means buying a foreclosure.
When a homeowner can’t make their mortgage payments, the bank will do their best to recover the money that was loaned. If, for whatever reason, they can’t settle the issue, the home may go into foreclosure, which essentially means the bank sells the home, usually at a discounted price.
While this is a difficult situation for many, foreclosures do present an opportunity for buyers. By purchasing a foreclosure properly, you can get a great deal. But before making a commitment, be sure to ask these important questions…
Don’t Buy a Foreclosure Without Asking These 13 Questions!
Questions to Ask Yourself
1. What Will I Do with the Property?
It’s a pretty basic question, but it’s one you need to think about for a long time. When you purchase the property, what is the short and longterm plan? Are you going to make it your home? Will you fix it up and sell? Will you rent the property? Think about what you will do immediately, and what you will do in the next five, ten, or twenty years.
2. What is My Budget?
You also need to sit down and think extremely hard about your specific budget. Think about the full price of the property, not the monthly payments, so you can organize your future budget properly. Once you have an idea of your top price, you can start thinking about monthly payments, but make total price the primary concern.
3. How Much Money Will I Have After the Purchase?
Yes, you can find foreclosures that are in great shape, but most will need some repairs and remodeling. How much cash will you have on hand after your purchase? You may need tens of thousands of dollars to make the home livable, so think carefully.
Questions to Ask the Seller (Homeowner or Selling Agent)
4. Why is the Property Being Foreclosed?
This is a perfectly fair question to ask. If you are buying a foreclosure, you deserve to know why the property is up for sale. Is it because the previous owner was laid off? Was the home simply too expensive? Did they stop making payments for a unique reason? Knowing the why will help you make an informed decision.
5. What is the Market Value of the Property?
If the home was not being sold in a foreclosure, how much would it be worth? Is there a significant difference between the foreclosure price and the appraised value?
6. How Old is the Home?
When it comes to foreclosures, the age of the home may not be as important, but it will make a difference if you are trying to sell the home soon. Also, if the home has been neglected, the age could be a sign that you will have some expensive repairs in the future.
7. What is the Age of the Roof, Plumbing, HVAC, Wiring, and Other Features?
While you’re discussing the age of the home, be sure to ask about the history of repairs and maintenance on the home. When was the last time the house was roofed? What are the ages of the A/C and heating units? Is the wiring from the 1950s? Is the plumbing older than that?
8. What Problems Has the Property Had in the Past?
This is a very general, open-ended question, and it may lead nowhere, but it remains essential. Ask about past inspections, problems with the foundation, problems with the neighbors, and any other issues that could arise. Because if these problems happened in the past, they could very well happen in the future.
9. How is the Surrounding Community?
Take time to evaluate the neighborhood. What is the unemployment rate? What’s the quality of the local school? Are there churches, parks, community centers, and entertainment? Know the neighborhood and you’ll be more (or less) comfortable making the purchase, and there will be fewer surprises in the future.
10. How Long Has the Home Been Unoccupied?
The longer a home has been unoccupied, the more likely you are to have problems. If the home has not been properly “mothballed,” you could have a long list of issues. The plumbing seals could dry out, the sewer gases could back up, and bugs could have made themselves at home. Understanding the amount of time that the home has been unoccupied may also uncover some other issues as to why the home hasn’t sold.
11. Are there Any Liens Against the Property?
The last thing you want is to buy a home that someone else claims. Be sure to thoroughly research the status of the property, and consider getting title insurance, which protects you against any claims on the title by another party. If the property has a lien, it stays with the home; if you buy, it now becomes your problem, not the seller’s. (Escaping the lien could be part of the reason that they are selling, so don’t neglect this question.)
12. How Was the Asking Price Determined?
You are shopping for a foreclosure to save money, so you deserve to know why a specific number is the asking price. The asking price is typically set by the bank, so you should know exactly how it was determined. Ask the agent to show information from you comparable property of recently-sold homes so you have a clear understanding of the deal. With comparable properties, you’ll know whether or not you’re getting a good deal.
13. Are there More Foreclosures in the Area?
The more foreclosures in an area, the less your property is likely to grow in value. Unfortunately, foreclosures send a wide range of negative messages to buyers, implying the neighborhood or city may be less than stellar. Don’t let other foreclosures stop you, just be aware of their impact. Also, if there are many foreclosures, expect a good discount on the property.
Get Real Estate Advice and Support When Buying a Foreclosure
Have questions about financing for foreclosures? The team at San Diego Purchase Loans can help you make an informed decision. With a knowledge of the real estate industry and access to some of the best financing products available, we can help you find the right loan for your foreclosure purchase.
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